Market Turning Points

Precision timing
for all time frames through a multi-dimensional approach to
forecasting
using technical analysis: Cycles - Breadth - P&F and Fibonacci price projections
supplemented by Elliott Wave analysis

"By the Law of Periodical Repetition, everything which has
happened once must happen again, and again, and again -- and not capriciously,
but at regular periods, and each thing in its own period, not another's,
and each obeying its own law... The same Nature which delights in periodical
repetition in the sky is the Nature which orders the affairs of the earth.
Let us not underrate the value of that hint." ~ Mark Twain

Current Position of the Market

SPX: Long-term trend - Bull Market

Intermediate trend - SPX has resumed its uptrend in order to complete
the last phase of the bull market.

Analysis of the short-term trend is done on a daily basis with the
help of hourly charts. It is an important adjunct to the analysis of daily
and weekly charts which discusses longer market trends.

Daily
market analysis of the short term trend is reserved for subscribers. If you
would like to sign up for a FREE 4-week trial period of daily comments, please
let me know at ajg@cybertrails.com.

LOOKING FOR A (TEMPORARY?) LOW

Market Overview

The first phase of the correction from 2116 was mild but, after a brief hold,
the decline accelerated into Friday, bringing the total loss to almost 100
points. The short-term is now very oversold and some positive divergence is
beginning to appear in the hourly indicators. The vicinity of some key projections
levels have also been reached, all of which, under normal circumstances, would
call for at least an oversold rally. However, Friday night's terrorist attack
in Paris may delay a recovery although, by Monday morning, emotions will have
had a chance to somewhat subside.

A more important question about whether or not we have made a short-term low
is, what does all this weakness mean? Is it only the volatile nature of the
market which tends to reach its objectives quickly, or should we start having
some second thoughts about the generally accepted notion that we are in wave
V? It's too early to pass final judgment on the market's position, and we should
not feel pressured to do so. The next couple of weeks should clarify where
we are in the current bull market, and what we can expect the near future to
bring. For now, let's go through the charts to see what they tell us - to date!

Intermediate Indicators Survey

As a result of the correction, the weekly MACD flattened at -4.60 and the
histogram lost ground but remained positive.

The weekly SRSI brought its shorter MA down to the longer one, but did not
go through.

The NYSI (courtesy of StockCharts.com) peaked at last week's 508 and
started to correct a very overbought RSI and MACD to a more normal level. Those
indicators remain in an uptrend, as does the index itself.

Chart Analysis

Daily SPX chart(courtesy of QCharts.com, as well as others below).

Last week I mentioned that the path of the SPX should be easy to track. It
still is, in spite of this week's weakness.

Two short term uptrend channels are drawn on the chart. The black, which encompassed
the uptrend from 1872, and the broader green one which delineates the longer
trend from 1867. The trend from 1872 was steep and kept within the upper half
of the black channel. When it broke into the lower half of the channel, it
paused briefly and then came out of the channel entirely. On Friday, it stopped
on a parallel drawn from the 1867 level after retracing about two-thirds of
that broader channel. This corresponds with all sorts of trend lines, tops
of former moves, P&F and Fib projections, and the bottom of the small red
channel which defines the current downtrend. In other words, a logical point
for support and a bounce. Should we get one, we will have to determine if the
rally we get is a resumption of the uptrend from 1872 and the continuation
of the assumed primary V wave, or if it's just a rally in a downtrend from
the 2116 top which will retrace only part way and then continue to decline
to the bottom of the broader green channel. If this is what happens, we are
back to the theory that the 5/20 high of 2135 is the bull market high, and
that the rally to 2116 simply completed a large A-B-C (marked in grey) wave
II correction! This will become more plausible if, after a bounce, the index
makes a 5th wave down to about 2000 or lower. This is what we must decide over
the next couple of weeks. No rush! Just follow the market's action. It will
reveal itself.

The indicators are all in a downtrend, although the A/D oscillator is beginning
to show some divergence but the momentum indicators will need to do more work
and may need to rally and then have a final decline. This places the current
bias on 2116 being the top of a "C" wave and not a primary V in progress.

On the hourly chart, I have labeled the waves of the second phase of the decline
to show that there are 5 distinct waves, and that wave 5 is showing some deceleration,
which is typical of this wave. It also shows how the first phase traded in
the top half of the red channel and then accelerated to the bottom of the channel
(which could widen to the dashed line). The acceleration really came when prices
broke out of the black uptrend channel. Now, the index has declined to a level
of support mentioned in the daily chart analysis and, technically, should hold
around this level providing that Friday night's terrorist attack in Paris does
not have a major impact on the market.

The hourly indicators tend to support the view that this decline should end
around here with the A/D oscillator showing the most positive divergence, with
some also reflected in the SRSI. The MACD is still declining, but the histogram
has begun a minimal uptrend.

All three of the leading/confirming indexes (XBD-IWM-TRAN) showed some clear
relative weakness to the SPX during the rally phase, especially the bottom
two. They were correct! Now, what are they saying? Nothing conclusive, so far.
Their retracements over the past two weeks have been proportional to that of
the SPX, although XBD has shown some reluctance to follow by refusing to break
its uptrend line. Unless this changes drastically on Monday, it would indicate
that we are ready for a bounce.

UUP has paused at the top of its correction channel, but there is no sign
of selling and if it can't even retrace its gap completely, it's a sign of
strength which should lead it to new highs before too long. The P&F projection
is at about 29, so there is plenty of room on the upside if its intention is
to fill that projection. That should put the dollar at about 113 or a little
higher before it tops out.

After creating some uncertainty, GLD looks as if it will have no problem reaching
my projection of 100. Since that does not look to be that far away, it is going
to create a dilemma with the dollar anticipating higher prices. Can GLD hold
this level while the dollar continues to rise? Perhaps it will simply build
a base and start moving up after the dollar peaks! Of course, it could also
continue to decline beyond 100!

Oil continues to show that its long term weakness is persisting. After meeting
its 13 projection, an attempt at re-starting an uptrend has failed. It is now
re-testing the low. If it fails to hold, 8 is a good possibility. WTCI has
a potential count of 35.

Summary

In the past week, the market correction has greatly accelerated. It is not
yet time to dismiss the present rally's capability to make a new bull market
high; but if the current trend continues, the projected primary wave V structure
may have to be revised to an A-B-C wave II correction.

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The above comments about the financial markets are based purely on what I
consider to be sound technical analysis principles uncompromised by fundamental
considerations. They represent my own opinion and are not meant to be construed
as trading or investment advice, but are offered as an analytical point of
view which might be of interest to those who follow stock market cycles and
technical analysis.